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Burford bows to pressure

In a bid to quell investor concerns around corporate governance, the litigation funder appointed its investment banker to the role of CFO
August 21, 2019

In an apparent recognition of investor concern over its corporate governance, under-fire Burford Capital (BUR) has announced a shake-up of its c-suite and board.

IC TIP: Hold at 820p

Optically, the most significant change concerns the litigation funder’s chief financial officer Elizabeth O'Connell, who has been reassigned to the role of chief strategy officer. Her marriage to chief executive Chris Bogart has drawn scrutiny since short-seller Muddy Waters described the relationship as a “laughter-inducing” example of the group’s governance strictures in a report published earlier this month.

“Under the best of circumstances, this should alarm investors,” the hedge fund wrote in its original report, which resulted in Burford’s share price falling by two-thirds. “However, with a company that consistently books non-cash accounting profits, it is unforgivable.”

Though Burford described these concerns as “unjustified” given its control, finance and accounting structure, it has already found a replacement for Ms O’Connell in Jim Kilman. Having acted as the group’s investment banker at Morgan Stanley, Mr Kilman has agreed to stay in the role for up to two years, during which time he will help guide Burford through a secondary listing in the US.

Burford says these plans were already well underway before the events of the past month, and expects to join NASDAQ or the NYSE “by the end of the first quarter of 2020”. If that fails, the group will seek a premium listing in London.

Perhaps mindful of the tighter corporate governance standards expected on the main market, Burford has begun a search to replace directors David Lowe and Sir Peter Middleton, both of whom have served on the board since 2009, and who will leave over the next two years. Mr Bogart will also join the board “in due course”.

Separately, Muddy Waters published a third-party behavioural analysis of Burford’s responses to the hedge-fund’s reports and allegations, which found signs of “aggression, evasion and persuasion” and indications of management deception “in their written and verbal responses”.